The Analysis of Monetary Transmission Mechaniscm by Expectation Patterns in Influencing the Inflation

Bank Indonesia set inflation targeting framework from 1 July 2005 by publicizing the inflation target or forward inflation to the public. However, the phenomenon show that most of the actual inflation of Indonesia is not in accordance with inflation targeting that have been set by Bank Indonesia. The purpose of this research is to analyze and know the flow of monetary policy transmission mechanism of expectation line in influencing inflation, to analyze and to know the influence of long-term and short-term and the shocks of interest rate, exchange rate, inflation expectations, output gap and GDP on inflation in Indonesia. The variables used in this research are BI Rate, Exchange Rate, Inflation Expectation, Output Gap, GDP and Inflation. The data used in this research is monthly data of time series from January 2006 until June 2016 which come from Bank Indonesia (BI) and Central Statistic Agency (BPS). The method used in this research is Vector Error Correction Model (VECM). The result of research indicates that: The flow of monetary policy transmission mechanism of expectation line in influencing inflation in Indonesia runs continuously with indicated the existence of two-way relationship between exchange rate and inflation variable, in the short term, the BI Rate, Exchange Rate and Output Gap are significant and positively affect inflation, inflation expectation variables are significant and affect inflation and GDP variable is insignificant to inflation in Indonesia, while in long run variable affecting inflation rate are BI Rate and inflation expectations, based on the variance decomposits result shows that the biggest variant contributing to inflation in Indonesia is the BI Rate.

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Analisis Mekanisme Transmisi Kebijakan Moneter Jalur Ekspektasi dalam Mempengaruhi Inflasi di Indonesia

Economics Development Analysis Journal ◽

10.15294/edaj.v7i4.27719 ◽

2018 ◽

Vol 7 (4) ◽

pp. 384-394

Author(s):

Ilma Ulfatul Janah ◽

Amin Pujiati

Keyword(s):

Exchange Rate ◽

Output Gap ◽

Inflation Expectations ◽

Short Term ◽

Correction Model ◽

Vector Error Correction ◽

Inflation Expectation ◽

Vector Error ◽

Policy Transmission ◽

Monetary Policy Transmission Mechanism

Tujuan dari Penelitian ini untuk menganalisis dan mengetahui alur dari mekanisme transmisi kebijakan moneter jalur ekspektasi dalam mempengaruhi inflasi di Indonesia, pengaruh jangka panjang dan jangka pendek serta guncangan variabel suku bunga, nilai tukar, ekspektasi inflasi, output gap dan PDB terhadap inflasi di Indonesia. Variabel yang digunakan adalah BI Rate, Nilai Tukar, Ekspektasi Inflasi, Output Gap, PDB dan Inflasi. Data yang digunakan adalah data bulanan deret waktu dari Januari 2006-Juni 2016 yang bersumber dari Bank Indonesia dan Badan Pusat Statistik (BPS) dengan menggunakan alat analisis Vector Error Correction Model (VECM). Hasil penelitian menunjukan bahwa alur mekanisme transmisi kebijakan moneter jalur ekspektasi dalam mempengaruhi inflasi di Indonesia berjalan berkesinambungan dengan ditunjukan adanya hubungan dua arah antara variabel nilai tukar dan inflasi. Pada jangka pendek variabel BI Rate, Nilai Tukar dan Output Gap signifikan dan berpengaruh positif terhadap inflasi, variabel ekspektasi inflasi signifikan dan berpengaruh terhadap inflasi dan variabel PDB tidak signifikan terhadap inflasi di Indonesia, sedangkan dalam jangka Panjang variabel yang berpengaruh terhadap laju inflasi hanya BI Rate dan ekspektasi inflasi. The purpose of this research is to analyze and know the flow of monetary policy transmission mechanism of expectation line in influencing inflation in Indonesia, to analyze and to know the influence of long-term and short-term and the shocks of interest rate, exchange rate, inflation expectations, output gap and GDP on inflation in Indonesia. The variables used in this research are BI Rate, Exchange Rate, Inflation Expectation, Output Gap, GDP and Inflation. The data used in this research is monthly data of time series from January 2006 until June 2016 which come from Bank Indonesia (BI) and Badan Pusat Statistik (BPS). The method used in this research is Vector Error Correction Model (VECM). The result of research indicates that: The flow of monetary policy transmission mechanism of expectation line in influencing inflation in Indonesia runs continuously with indicated the existence of two-way relationship between exchange rate and inflation variable, in the short term, the BI Rate, Exchange Rate and Output Gap are significant and positively affect inflation, inflation expectation variables are significant and affect inflation and GDP variable is insignificant to inflation in Indonesia, while in long run variable affecting inflation rate Only the BI Rate and inflation expectations.

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Monetary Policy Transmission under Inflation Targeting in Mongolia

Research in Applied Economics ◽

10.5296/rae.v10i2.12950 ◽

2018 ◽

Vol 10 (2) ◽

pp. 1 ◽

Cited By ~ 2

Author(s):

Erdenechuluun Khishigjargal

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Interest Rate ◽

Inflation Targeting ◽

Transmission Mechanism ◽

Monetary Policy Transmission ◽

Rate Transmission ◽

Policy Transmission ◽

Monetary Policy Transmission Mechanism ◽

The Interest Rate

This article aims to examine the monetary policy transmission mechanism under the inflation targeting in Mongolia for the period from June 2007 to August 2017 by applying a recursive vector-autoregressive model. Under the inflation targeting framework, the Bank of Mongolia has established the interest rate corridor since February 2013 for the purpose of improving the interest rate channel of the transmission mechanism. The study then contributes to the literature by assessing whether the interest rate corridor has really improved the policy rate transmission effects by comparing the effects between the pre-corridor period (from June 2007 to February 2013) and the post-corridor period (from March 2013 to August 2017). The main findings of this study are as follows. First, in the post-corridor period the effect of policy rate is clearly transmitted to the lending rate and inflation rate through the responses of interbank market rate, whereas the pre-corridor period does not represent any significant interest rate transmission effects. This outcomes implies that the interest rate corridor has contributed to enhancing monetary policy transmission mechanism. Second, the responses of exchange rate and industrial production to the policy rate shock are not significant even after the adoption of the interest rate corridor. This insignificance might come from the stick policy rate to stabilize the exchange rate, so-called a “fear of floating”.

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Sukuk and monetary policy transmission in Indonesia: the role of asset price and exchange rate channels

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-09-2019-0177 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Suriani Suriani ◽

M. Shabri Abd. Majid ◽

Raja Masbar ◽

Nazaruddin A. Wahid ◽

Abdul Ghafar Ismail

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Interest Rates ◽

Asset Price ◽

Transmission Mechanism ◽

Monetary Policy Transmission ◽

Content Type ◽

Policy Transmission ◽

Monetary Policy Transmission Mechanism

Purpose The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in the Indonesian economy. Design/methodology/approach Using the monthly data from January 2003 to November 2017, this study uses a multivariate vector error correction model causality framework. To examine the role of sukuk in the monetary policy transmission mechanism through the asset price channel, this study uses the variables of consumption, inflation, interest rates, economic growth and the composite stock price index. Meanwhile, to examine the role of sukuk in the monetary policy transmission mechanism through the exchange rate channel, this study used variables of inflation, interest rates, economic growth, foreign investment and exchange rate. Findings This study documented that sukuk has no causal relationship with inflation through asset price and exchange rate channels. Nevertheless, sukuk has a bidirectional causal relationship with economic growth through asset price and exchange rate channels. Sukuk is also documented to have a causal relationship with monetary policy variables of interest rate and stock prices through asset price and exchange rate channels. Finally, a unidirectional causality is recorded running from the exchange rate to sukuk in the exchange rate channel. Research limitations/implications The finding of independence of the sukuk market from interest rates provides evidence that the trading of the sukuk in Indonesia has been in harmony with the Islamic tenets. Practical implications The relevant Indonesian authorities need to enhance both domestic and global sukuk markets as part of efforts to promote the sustainability of Islamic capital market development in Indonesia. Originality/value To the best of the authors’ knowledge, this study is among the first attempts to empirically investigate the role of sukuk in monetary policy transmission through asset price and exchange rate channels in the context of the Indonesian economy.

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PERBANDINGAN EFEKTIVITAS MEKANISME TRANSMISI KEBIJAKAN MONETER ANTARA JALUR SUKU BUNGA DENGAN JALUR NILAI TUKAR TERHADAP SASARAN AKHIR INFLASI

Media Ekonomi ◽

10.25105/me.v25i1.5199 ◽

2019 ◽

Vol 25 (1) ◽

pp. 1

Author(s):

Martin Simanjuntak ◽

Budi Santosa

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Interest Rate ◽

Time Lag ◽

Transmission Mechanism ◽

Monetary Policy Transmission ◽

Policy Transmission ◽

Monetary Policy Transmission Mechanism ◽

The Interest Rate ◽

Interest Rate Channel

This result discusses the effectiveness of the transmission mechanism of monetary policy by comparing the interest rate channel with the exchange rate channel towards the final inflation taget. This study using regression method Vector Error Correction Model (VECM). In the study of this monetary policy transmission mechanism using secondary data based on monthly time series, namely from January 2011 to December 2015. The data is obtained from Bank Indonesia Financial Economic Statistics (SEKI). From the results of this research, the transmission mechanism of monetary policy exchange rate channel is more effective than monetary policy transmission mechanism interest rate channel; it is proven through the test impulse responses and variance decomposition test. In the exchange rate channel time lag until reach the final target of monetary policy (inflation) is 4 months while for the interest rate channel time lag until reach the final target of monetary policy is 5 months. RPUAB very suitable for use as an operational target in the monetary policy transmission mechanism cause rapid and strong response from RPUAB in responding the shock of monetary policy. RPUAB is the biggest variable that dominates the formation of inflation.

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Interest Rate Channel of Monetary Policy Transmission Mechanism and Commercial Banks Earnings in Nigeria

African Journal of Accounting and Financial Research ◽

10.52589/ajafr-hgh92rha ◽

2021 ◽

Vol 4 (3) ◽

pp. 194-214

Author(s):

Uzah K. C. ◽

Clinton A.M. ◽

Kpagih L.

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Commercial Banks ◽

Transmission Mechanism ◽

Monetary Policy Transmission ◽

Short Term ◽

Policy Transmission ◽

Lending Rate ◽

Monetary Policy Transmission Mechanism

This study examined the interest rates channel of the monetary policy transmission mechanism and the earnings of commercial banks in Nigeria. The objective was to investigate the extent to which the interest rates channel of the monetary policy transmission mechanism affects the earnings capacity of the quoted commercial banks. Time series data were sourced from annual financial reports of the commercial banks and the Central Bank of Nigeria statistical bulletin’s various issues. Earnings measures such as earnings per share and earnings before interest and tax were modeled as the function of Monetary Policy Rate, Prime Lending Rate, Short-term Savings Rate, Long-term Saving Rate and Maximum Lending Rate. The Ordinary Least Square method of Regression Analysis was used to estimate the relationship between the dependent and the independent variables. Augmented Dickey Fuller Test, Johansen Cointegration Test, Granger Causality Test and Vector Error Correction Test were used to determine the dynamic relationship among the variables. Findings showed that short-term and long-term savings rates have negative effects while monetary policy rate, maximum lending rate and prime lending rate have positive effects on the earnings capacity of Nigerian commercial banks. Therefore, we recommend that interest rate policies should be integrated with the earning objectives of the commercial banks.

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Effectiveness of Monetary Policy Transmission Mechanism in an Implicit Inflation Targeting Regime: The Case of Nigeria.

10.21203/rs.3.rs-317014/v1 ◽

2021 ◽

Author(s):

Anthony Enisan Akinlo ◽

Olumuyiwa Tolulope Apanisile

Keyword(s):

Monetary Policy ◽

Inflation Targeting ◽

Transmission Mechanism ◽

Monetary Policy Transmission ◽

Monetary Aggregate ◽

Policy Transmission ◽

Development Indicator ◽

World Development Indicator ◽

Implementation Of Monetary Policy ◽

Monetary Policy Transmission Mechanism

Abstract The study examines the effectiveness of the monetary policy transmission mechanism in Nigeria by estimating a sticky-price DSGE model using the Bayesian estimation approach. This study is important given the implicit inflation targeting framework employed in the implementation of monetary policy in the country. The study employs quarterly data from 2000:1 to 2019:4 to estimate the two main categories of monetary policy frameworks, monetary aggregate and implicit inflation targeting, respectively. Data are sourced from World Development Indicator (online version). Empirical results show that the monetary policy transmission channels are effective in transmitting policy impulses to the economy within this regime. However, the monetary aggregate framework that is made explicit dampens the achievement of this framework. The study, therefore, concludes that inflation targeting should be made explicit in the country in other to reap the benefits embedded in the framework.

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Analysis of the Effectiveness of Monetary Policy Transmission through a Line of Credit and Inflation Expectations in Indonesia

International Journal of Research and Review ◽

10.52403/ijrr.20210538 ◽

2021 ◽

Vol 8 (5) ◽

pp. 299-309

Author(s):

Suti Masniari ◽

Sirojuzilam . ◽

Dede Ruslan

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Regression Model ◽

Interest Rates ◽

Secondary Data ◽

Transmission Mechanism ◽

Output Gap ◽

Inflation Expectations ◽

Policy Transmission

This study aims to determine the effectiveness of the transmission mechanism of monetary policy by reviewing the amount of the deadline that required the transmission mechanism of monetary policy in achieving the goals of the final form of the output gap and inflation by using the channel of credit and inflation expectations. In addition, this study also aims to determine the relationship long-term and short against the target output gap and inflation. This study uses a regression model Vector Error Correction Model (VECM) to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of credit and the regression model of Vector Autoregression (VAR) to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of inflation expectations. The Data used in this research is the data series time quarter from 2008 to 2018. Data peneliltian used to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of credit in the form of secondary data consisting of the benchmark interest rate of Bank Indonesia, the interest rates on the interbank money market 1 month, loan interest rates, money supply (M2) and the amount of working capital loans disbursed. While the data used to estimate the influence of the transmission mechanism of monetary policy to the output gap and inflation through the channel of inflation expectations in the form of secondary data consisting of the benchmark interest rate of Bank Indonesia, inflation expectations. The secondary Data used is sourced from the annual reports that are published from the official website of the Bank of Indonesia, the data of the Central Bureau of Statistics and the International Monetary Fund. The results of this study showed that the effectiveness of the transmission mechanism of monetary policy through the credit channels require the deadline each of the 8 (eight) of the quarter and 10 (ten) quarter in achieving the goals of the end of the output gap and inflation. While the effectiveness of the transmission mechanism of monetary policy through the channel of inflation expectations require the deadline each of the 4 (four) quarter and 6 (six) quarter in achieving the goals of the end of the output gap and inflation. The results also showed only policy transmission mechanism built rmelalui credit lines that have long-term relationships against inflation while the transmission mechanism of monetary policy through the channel of inflation expectations have short-term relationship strong. Keywords: The Transmission Mechanism Of Monetary Policy, Output Gap, Inflation.

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Monetary Policy Transmission Mechanism in Namibia: A Bayesian VAR Approach

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v9i5.1921 ◽

2017 ◽

Vol 9 (5) ◽

pp. 169-184

Author(s):

Johannes PS Sheefeni

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Interest Rate ◽

Asset Price ◽

Transmission Mechanism ◽

Real Effective Exchange Rate ◽

Series Data ◽

Monetary Policy Transmission ◽

Policy Transmission ◽

Monetary Policy Transmission Mechanism

This study analyzed the interest rate channel, credit channel, exchange rate channel and asset price channel for monetary policy transmission mechanism in Namibia. The idea behind this study is to have a comprehensive study that covers a variety of channels for monetary policy transmission mechanism. The study utilized a Bayesian vector autoregression (BVAR) technique on quarterly time-series data covering the period 2000:Q1 to 2016:Q4. In particular, the validity of the data used is checked and verified by using two sets of prior distributions suggested by Sims and Zha as well as prior distribution of Koop and Korobilis. The variables used in this study are real output (Yt), real effective exchange rate (Et), inflation rate (P t), repo rate (Rt), housing price index (Ht) and credit extended to private sector (Lt). The findings revealed that interest rate and credit channels remain important in the transmission mechanism to this day. Notably the exchange rate and asset price channels are also slowly gaining prominence in monetary policy transmission mechanism. Therefore, the study provides useful information to the monetary authorities regarding the process of transmission mechanisms. This is quite important especially that the Central Bank (Bank of Namibia) is very serious about financial stability within the financial system, given the fragility of the financial systems in the world due to financial crisis.

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Using Macroeconomic Models for Monetary Policy in Ukraine

Visnyk of the National Bank of Ukraine ◽

10.26531/vnbu2015.233.054 ◽

2015 ◽

pp. 54-64 ◽

Cited By ~ 5

Author(s):

Sergiy Nikolaychuk ◽

Yurii Sholomytskyi

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Inflation Targeting ◽

Transmission Mechanism ◽

Successful Implementation ◽

Monetary Policy Transmission ◽

Macroeconomic Models ◽

Current State ◽

Policy Transmission ◽

Monetary Policy Transmission Mechanism

An important precondition for successful implementation of inflation targeting is the ability of the central bank to forecast inflation given the fact that the inflation forecast has become an intermediate target. Certainly, this means there should be clear understanding of the monetary policy transmission mechanism functioning within the bank, because it is precisely through transmission channels that a central bank has to ensure convergence of its inflation forecast to the target. And it is almost impossible to pursue inflation targeting without a set of macroeconomic models that describes the monetary policy transmission mechanism and helps to analyse the current state of the economy as well as forecast (simulate) short- and medium-term macroeconomic scenarios. This article provides a review of the current state of macroeconomic modelling at central banks and describes the history of development and actual stance of the National Bank of Ukraine’s system of macroeconomic models. The existing system provides quite reliable support for the current monetary policy decision-making process, but it has to be improved by implementing a more sophisticated model (such as a dynamic stochastic general equilibrium model) and enhancing the set of econometric models for shortterm forecast purposes in the future.

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Var analysis and monetary transmission mechanism in Kazakhstan

Proceedings of International Young Scholars Workshop ◽

10.47344/iysw.v9i0.240 ◽

2020 ◽

Vol 9 ◽

Author(s):

Aliya Rakisheva ◽

A Kalikhan ◽

Hayot Berk Saydaliev

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Interest Rate ◽

Transmission Mechanism ◽

Monetary Policy Transmission ◽

Lending Channel ◽

Policy Transmission ◽

Monetary Policy Transmission Mechanism ◽

The Interest Rate ◽

Interest Rate Channel

We explore monetary policy transmission by estimating VAR impulse response functions to illustrate the Kazakhstan economy’s response to unexpected changes in policy.This article helps to evaluate the work of the main channels of the monetary policy transmission mechanism, namely, the work of the interest rate channel, exchange rate, and lending channel in the Republic of Kazakhstan, by the help of vector regression model (VAR). It was revealed that the main transmission channel in the study period from 2005 to 2019 in Kazakhstan was the exchange rate channel.The other two remaining channels of the monetary policy transmission mechanism (the bank lending channel and the interest rate channel) were of secondary importance.We find a significant exchange rate pass-through to prices, and interest rate policy following, rather than leading, financial market developments. Our estimated monetary policy reaction function shows the central bank striking a balance between real exchange rate stability and containing inflation. We discuss dollarization, administrative interventions, and other features complicating monetary policy transmission, review specific constraints and vulnerabilities, and conclude with observations on possible measures that could raise the effectiveness of monetary policy in Kazakhstan.

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